Ncfm Trainning - Cm Chapter 2

Clearing & Settlement

Clearing & Settlement • • • • • •

T+2 Rolling settlement Clearing Corporation (NSCCL) D Depositories it i (NSDL (NSDL, CDSL) Demat form DP Pay-in Pay in & Pay-out Pay out of Funds & Securities

Settlement Process • NSCCL – Determination of Obligation – Pay-in Pay in of Funds and Securities – Pay-out of Funds and Securities

Settlement Process

Settlement Agencies 1 NSCCL 1. NSCCL (National Securities Clearing Corporation Ltd.) (N i lS i i Cl i C i L d ) ‐ responsible  ibl for post market trades. 2. Clearing Members – is trading member on behalf of trader (Angel  broking) 3. Custodians ‐ Responsible for settlement of trades(Securities/Funds)  as prescribed by NSCCL 4. Clearing Banks – settlement of funds obligated by NSCCL & custodian 5. Depositories ‐ Settlement of Shares obligated by NSCCL & custodian 6. Professional Clearing Members  (PCM) – is same as custodians .He  clears the trade of trading member and institutional clients.

Settlement Cycle • NSCCL receives trading data from NSE g • NSCCL determines Cumulative Obligation of each member  and transfers data to the Clearing Member • Net Position (Funds / Securities) • Clearing Members put funds / securities in the respective pay‐ in accounts in accounts • NSCCL sweeps funds / securities from the pay‐in account of  Delivering Member (0930 – 1030) • NSCCL credits funds / securities to the pay‐in account of  Receiving Member (200 PM – 230 PM)

Security Settlement Security Settlement Auction in case of Shortage 930 AM

Before 930 AM

Member

Clearing Account

NSCCL

2:30 PM After 2:30 PM

Funds Settlement Funds Settlement Penal charges if Funds Shortage 11 AM

Before 11 AM

Member

Clearing Account

NSCCL

1:30 PM After 1:30 PM

Settlement Cycle Trading Day

Buying / Selling T

Settlement

Pay-in / Pay-out T+2

Auction

T+3

Auction Settlement

T+4 (BSE) T+5 (NSE)

Auction / Close Out / ‰Short deliveries of Securities go into Auction ‰Auction Price + 1% Penalty debited to defaulting seller ‰Max. allowable Bid price= Prev. Day Close+20% ‰Original Buyer gets shares on T+5 day ‰If nobody bids for Auction, Close‐out done    @Highest  Price between T & T+2 Day + 20% Penalty The amount Price between T & T+2 Day + 20% Penalty. The amount  gets credited to original buyer.

Margins ‰Value at Risk (VaR) Margin ‰Value at Risk (VaR) Margin ƒ 99% Variance ƒ Calculated on  Calculated on “Net Net Outstanding Sale Outstanding Sale”

‰Mark to Market (MTM) Margin ƒ Difference between Trade Price & Closing price ƒ Defined as “Notional Loss incurred if all positions of  TM squared of at closing price of the respective  scripts””

Trading & Exposure Limits Trading & Exposure Limits ‰Gross Intra ‰Gross Intra‐day day  Turnover (Buy + Sell)

<

33 33 x Capital 33.33 x Capital

‰Gross exposure  8.5 x free capital  (If free Capital < Rs. 1 Cr.) Rs. 8.5 Cr. + 10 x (free capital – Rs. 1 Cr.) ( (If free Capital > Rs. 1 Cr.) p )

ISIN No. ISIN No. • Allotment by SEBI Allotment by SEBI • Unique No. to identify the script

Investor Protection Fund Investor Protection Fund • IPF IPF set up as a trust  set up as a trust • Settlement of claims wherein the Trading  Member has been declared defaulter Member has been declared defaulter • Non – payment / non – receipt of securities • Max. claim Rs. 10 lacks

Trading Membership Trading Membership • Individuals Individuals / Partnerships / Institutions /  / Partnerships / Institutions / Corporates • Should not be Bankrupt Should not be Bankrupt • Should not have been convicted for Fraud • Should not have been expelled / declared a  defaulter by any other Stock Exchange • Should not have been debarred by SEBI, RBI  etc.